Unemployment in Britain fell unexpectedly last month, suggesting that the labour market may be in better shape than feared.

Employment also improved, although this was due to a rise in self-employment and part-time work. The number of full-time employees fell.

The number of people claiming jobless benefits dropped by 3,700 to 1.5 million in October from the previous month, the Office for National Statistics said this morning, the first monthly fall since July. Economists had expected the number to rise by 5,000. September's increase was revised to just 1,300, from 5,300.

On the internationally recognised ILO measure, which includes people not claiming benefits, unemployment was also down, by 9,000 to 2.45 million in the three months to September. The jobless rate remained at 7.7%.

However, the government's drastic spending cuts are expected to push unemployment higher in coming months. The government will cut 490,000 public sector jobs over the next four years as part of efforts to slash the record budget deficit.

"The thrust of the data suggests that the labour market conditions are not deteriorating as much as they were in recent months – but nor are they getting any better," said Alan Clarke, UK economist at BNP Paribas.

The ONS said the number of people in work hit its highest level since February 2009. However, this was mainly driven by a rise in self-employment to a record high of 4.03 million, and part-time workers, up 94,000 to 6.76 million. The number of full-time employees fell by 62,000 to 18.2 million.

More than a third of the unemployed have now been out of work for more than a year. The number of women who are out of work now tops one million – the highest figure since the late 1980s, noted Nigel Meager, director of the Institute for Employment Studies. The situation is likely to get worse with the planned half a million job cuts in the female-dominated public sector.

The number of job vacancies has fallen again – there are 5.3 unemployed people chasing every vacancy. Wage growth picked up, with average earnings recording the highest growth, at 2%, since May.

Employment minister Chris Grayling said: "Unemployment is down and employment is up, which is good news. The private sector is leading the way and creating jobs and opportunities for people across the country. Today's figures show that businesses are responding well and we will continue to help them expand and develop, as the economy grows."

The TUC disputed this interpretation. Its general secretary, Brendan Barber, said: "While any fall in unemployment is welcome, it would be dangerously naive to believe that these figures constitute a jobs recovery. The overall rise in employment is based on shaky foundations with a notable rise in involuntary part-time work. With unemployed people outnumbering job vacancies by five-to-one it's time the government focused on helping them back into work, rather than insisting that the labour market is flourishing."

MPC split

Separately, the minutes of the last Bank of England meeting two weeks ago showed the monetary policy committee was split three ways for the second month running. Andrew Sentance repeated his call for a quarter-point interest rate increase while Adam Posen argued that the economy needed £50bn more quantitative easing to counteract the government's austerity drive. The rest of the committee backed no change.

The three-way split came as no surprise to the City, which expects interest rates to remain on hold for some time. Some analysts still see a chance of more quantitative easing next year if the economy falters.